China news agency, new york, May 3 (Reporter dorri) The US Federal Reserve announced on the 3rd that it would raise the target range of the federal funds interest rate by 25 basis points to 5% to 5.25%. This is the tenth consecutive rate hike by the Federal Reserve since last March.
The Federal Reserve issued a statement after the two-day regular monetary policy meeting, continuing to emphasize that "the American banking system is sound and resilient" and that the Federal Reserve is "highly concerned about inflation risks". However, this statement deleted the words "some additional policy tightening may be appropriate" and "forming a sufficiently restrictive monetary policy stance", which led to speculation that this might be a signal to suspend interest rate hikes.
According to the statement, in the first quarter of this year, economic activities in the United States grew moderately, employment growth was strong in recent months, the unemployment rate remained low, and the inflation rate remained high. The American banking system is sound and resilient. Tightening credit conditions for households and enterprises may put pressure on economic activities, employment and inflation, and the extent of the related impact is still uncertain. The Fed remains highly concerned about inflation risks.
The statement said that in order to support the goal of achieving full employment and 2% long-term inflation rate, the Fed decided to raise the target range of the federal funds rate to 5% to 5.25%, and will pay close attention to the upcoming data and evaluate its impact on monetary policy. When determining the additional degree of policy tightening that may be appropriate, the Fed will consider the cumulative tightening of monetary policy, the impact of monetary policy on economic activities and the economic and financial development. The Fed will continue to reduce the size of its balance sheet as planned.
At the press conference after the regular monetary policy meeting, Federal Reserve Chairman Powell stressed that it is the responsibility of the Federal Reserve to stabilize prices, and "there is still a long way to go to achieve the goal of reducing the inflation rate to 2%". Asked if the deletion of some words in this statement means that the current interest rate hike cycle will end, Powell said that this will be a continuous evaluation process, but "we are closer to the end of interest rate hike than to the beginning of interest rate hike". He revealed that Fed officials had talked about suspending interest rate hikes at the meeting, but the overwhelming majority of officials supported the interest rate hike by 25 basis points. He pointed out that the future monetary policy needs to be decided at future meetings one after another.
Regarding the banking crisis in the United States, Powell said that monetary policy tools and financial stability tools are not in conflict, and the Federal Reserve has used financial stability tools to support banks. The investigation report on bank failures in Silicon Valley released by Federal Reserve Vice Chairman Barr is very convincing. The problems encountered by regional banks have now been solved. "We will continue to pay close attention to what happened in the banking system."
The three major indexes of the US stock market fluctuated violently during Powell’s speech and finally closed down. As of the close of the day, the Dow Jones Industrial Average fell 270.29 points, or 0.8%, to 33,414.24 points. The Nasdaq Composite Index fell 55.18 points, or 0.46%, to 12,025.33 points. The Standard & Poor’s 500-stock index fell 28.83 points, or 0.7%, to 4,090.75.
The Wall Street Journal said that although the Fed’s statement seemed to signal a suspension of interest rate hikes, Powell said at a press conference that officials had not yet made a decision. Some analysts pointed out that if the future data shows that the inflationary pressure in the United States has not subsided quickly enough, the Fed has left room for raising interest rates again in advance. In addition, Powell’s answer to the banking problem failed to effectively calm the market sentiment. Investors could not be encouraged, which led to the US stocks completely giving back their earlier gains and closing down near the close. (End)